Q. We purchased two cars in 2018 for my wife and I. Can we deduct the sales tax we paid on our tax return as an itemized deduction?

A. Sales tax was a deduction until the 1986 Tax Reform Act “simplified” the tax system. The 2004 Jumpstart Our Business Strength (JOBS) Act, enacted Oct. 22, 2004, provided that at the election of the taxpayer, state and local general sales tax may be taken as an itemized deduction in lieu of the itemized deduction provided under present law for state and local income taxes.

Taxpayers have two methods with respect to calculating the sales tax deduction amount. Taxpayers are able to deduct the total amount of general state and local sales taxes paid by accumulating receipts showing general sales taxes paid. Alternatively, taxpayers may use tables created by the Internal Revenue Service. These tables are based on average consumption by taxpayers on a state-by-state basis taking into account filing status, number of dependents, adjusted gross income and rates of state and local general sales taxation.

Taxpayers who use the Internal Revenue Service tables may, in addition to the table amounts, deduct eligible general sales taxes paid for the purchase of motor vehicles, boats, aircraft, homes and materials to build a home. However, if your state and local income tax deduction calculates higher than your sales tax deduction, you will be better off taking the higher state and local tax deduction amount.

There are many other expensive items taxes on which cannot be added to the sales tax table amount. These include expensive home furnishings such as furniture, appliances and high-end audio or video components. A taxpayer who purchases such items should keep receipts for all sales taxes. Also, an individual who is planning to pay for a large party on which sales taxes are paid, such as a catered wedding reception should save receipts to preserve the possibility of achieving a larger actual deduction than would be achieved under the tables.

On Dec. 15, 2015, the state and local general sales tax deduction was made permanent with the signing of the PATH Act.

Please note that the Tax Cuts and Jobs Act, effective Jan. 1, 2018, now limits your federal deduction for state and local taxes (including sales tax) to $10,000 per year. Therefore, the benefit of the sales tax deduction, if any, is dependent upon the amount of other qualified tax deductions available to you.

Barry Dolowich is a certified public accountant in Monterey. He can be reached at 831-372-7200, P.O. Box 710, Monterey 93942-0710 or bdolowich@gmail.com.